Table of contents

What is Agile Transformation?

Agile transformation is the process of transforming the structure, strategy, people, processes, and technology of an organization based on enterprise Agile principles.

Understanding what Agile transformation is requires a firm understanding of what it is not: Simply practicing Agile software development methods at enterprise scale. While most organizations will begin their Agile journeys by adopting Agile software development practices, there is much more to Agile transformation than simply changing how software gets built.

Understanding what Agile transformation is requires a firm understanding of what it is not: Simply practicing Agile software development methods at enterprise scale.

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Agile transformation helps organizations align strategy, people, process, and technology.
Agile transformation helps organizations align strategy, people, process, and technology.

Transformation looks different from organization to organization, but one thing is universal: It is a journey. Some organizations are born Agile, and simply scale as they go. Others follow one of three paths, as defined by McKinsey & Company: All-in, where the organization commits to a broad Agile transformation; Step-wise, which involves a more gradual approach; and Emergent, in which Agile emerges from the bottom up.

Regardless of the path an organization takes towards Agile transformation, it must have these two characteristics: The transformation must be comprehensive, touching not just processes, but strategy, organizational structure, people, and technology. The transformation must also be iterative, meaning the organization must plan to evolve with the process of transformation. It is impossible (and frankly, not very agile) to try to plan an entire Agile transformation upfront.

McKinsey & Company outlines how Agile transformation touches every facet of the organization, with strategy at the center.

Source: https://www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization
Source: https://www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/the-journey-to-an-agile-organization

Benefits of Agile Transformation

While Agile transformation requires time, effort, and discipline on behalf of the entire organization (no small feat!), it has proven to be worth the effort. Compared to their non-Agile counterparts, Agile enterprises enjoy faster time to market, higher quality products, increased customer satisfaction, increased employee engagement and productivity, a greater ability to pivot, and a positive impact on company culture.

Faster time to market

You know the saying, “Time is money.” Increasing time to market can result in immense savings for organizations. It can also help to improve market position – companies who can anticipate and deliver on customer demand ahead of their competitors are that much more likely to win.

It’s no surprise then, that faster time to market is one of the main draws to Agile for many organizations: Studies show that Agile organizations have, on average, 37 percent faster time to market than non-Agile competitors.

Higher quality products

With shorter feedback loops, focused, cross-functional teams, and a relentless customer focus, Agile organizations are able to deliver higher quality products than their competitors.

For example, one major North American financial institution compared defect rates between products created using Agile and waterfall methods. While the waterfall method products had 65 defects of a high severity after release, the Agile products had just 34. The company also found that 15 percent of defects in the waterfall products were the result of misunderstood requirements, compared to 1-2 percent for Agile products.

Increased customer satisfaction

A relentless focus on customer satisfaction is a key tenet of Agile; it makes sense then, that increased customer satisfaction would be a result of Agile transformation.

Agile organizations increase customer satisfaction by shortening feedback loops, soliciting customer feedback, and using customer data to drive decision making.

According to one McKinsey study, Agile organizations sampled experienced a 20- to 30-point improvement in engagement, compared with a non-Agile environment.

Increased employee engagement and productivity

The Agile approach emphasizes collaboration, experimentation, and a data-driven approach, creating an environment where those who truly prioritize creating customer value and working well with others are rewarded.

The result is increased employee engagement and productivity: According to one McKinsey study, Agile organizations sampled experienced a 20- to 30-point improvement in engagement, compared with a non-Agile environment.

Ability to pivot

One of the most transformational aspects of Agile transformation is the movement away from traditional organizational structures, into autonomous, cross-functional teams. Forming these self-contained units, usually consisting of about 5-10 individuals, means that Agile organizations are able to reduce handoffs, increase speed, and pivot with greater agility.

Agile transformation enables organizations to align around value streams and measure their impact with greater visibility.
Agile transformation enables organizations to align around value streams and measure their impact with greater visibility.

Positive impact on company culture

The impact of Agile transformation on company culture can be explained rather simply: People like to do good work. When organizations remove the waste involved in redundant meetings, repetitive planning, excessive documentation, poor quality, and poor visibility, and instead focus on building high-performing, cross-functional teams, delivering real customer value, and breaking down barriers to communication, people are better equipped to do their best work. When effort, experimentation, and collaboration are rewarded, company culture improves.

What Are Some Common Challenges in Agile Transformation?

Rolling out a transformational operational plan

While there are many paths to Agile transformation, one thing is universally true: The path is winding. Successfully rolling out a transformational operational plan is often a challenge for organizations going through Agile transformation.

One reason for this is that Agile transformations are inherently iterative: They cannot be executed, or even planned for, all at once. While certain changes can be executed overnight, others take time. Creating a comprehensive plan for how the organization will evolve its strategy, structure, people, processes, and technology – and communicating that throughout the organization in a clear, transparent way – is often viewed as one of the most challenging parts of Agile transformation.

Resistance to change

Planning for (and communicating about) change is one thing; getting an entire organization to embrace it is another thing entirely. Resistance to change can come in many forms throughout an Agile transformation: Legacy processes can be difficult to unravel. Legacy mindsets even more so; Those accustomed to a more traditional, command and control-type of leadership often struggle to embrace the flatter, more democratic and servant leadership approach of Agile.

In Agile organizations, failure is seen as a form of success, because failure is equated with learning.

Another change that can be difficult for people to embrace is the Agile concept of embracing failure. In corporate cultures, success is the opposite of failure; failure is something to hide, shy away from, or avoid. In Agile organizations, failure is seen as a form of success, because failure is equated with learning.

Proving ROI of transformation

In some organizations, the charge for Agile transformation comes from the top. In others, it is more of a grassroots effort, which may or may not have full executive (or stakeholder) support. Proving the ROI of transformation can be a challenge, because transformation can be disruptive in itself. The other challenge here is that Agile transformation involves transforming how success is measured, and how data is collected to measure that success. So the metrics that an organization might typically use to measure its success, might not accurately measure the performance of the organization.

This article and webinar explain how to measure ROI throughout your Agile transformation.

Changing from output to outcomes

We touched briefly on how the way success is measured in organizations evolves as they go through Agile transformation. This shift can be simplified as this: Changing from measuring output, to measuring outcomes. It’s the shift from “How many Xs can we deliver this year?” to “How are the Xs we’re delivering meeting the needs of our customers?”

Reorienting teams around this shift is challenging; as is reorienting the way work is planned, funded, and measured.

Building a core team of champions

Transformation requires breaking some things in order to build new, better ones. In the midst of these “growing pains,” it’s easy to get caught up in what is broken and lose sight of the bigger vision. Building a core team of champions – Agile enthusiasts and experts who can keep the transformation on track – is key for Agile transformation success.

The purpose of this core team of champions – often called a ‘change team’ or ‘culture and change team’ – is to provide guidance, Agile know-how, and moral support as organizations experience the pains of transformation. The challenge is that not many people have both experience with Agile transformation and a deep knowledge of their own company. This is why many organizations choose to hire external consultants to perform this critical role.

Shifting the way we work often requires shifting the tools we use.

Finding the right technology partner

The tools we use shape the way we work. And shifting the way we work, often requires shifting the tools we use. For many organizations, the technology shift required in Agile transformation isn’t just the shift from a non-Agile enterprise tool to an Agile one – it’s the shift from teams within the organization working in completely disparate technology stacks, to working in one Agile enterprise solution that meets the needs of newly formed, cross-functional teams.

Finding the right technology partner to support the Agile way of working, plus evolving the architecture, delivery pipeline, and IT infrastructure and operations to support rapid changes, can be a challenge.

Agile Transformation Management for Executives

Change management for Agile transformation

Managing change during an Agile transformation is a tall order, especially for executives who are responsible for guiding the direction of the organization while supervising the transformation itself. Effective change management means embracing change while providing structure; providing visibility and accountability into the progress of the transformation; and acknowledging little and big wins as well as learnings along the way.

Servant leadership

One of the major shifts that must occur within leadership is the shift from “command and control” leadership (and all that it entails) to the Agile approach: servant leadership. Servant leadership guides and directs where traditional leadership commands. It listens more, and dictates far less. Servant leaders spend time “in the trenches” with teams so they can fulfill one of their primary responsibilities: Removing obstacles from the paths of the teams they serve.

Set vision and objectives

The impetus is on executives to set and communicate a vision for the Agile transformation, and to define objectives that will help to fulfill that vision: Where are we going, and how will we know if we’re getting there?

Then, it’s the task of leadership to get out of the way: Teams (or teams of teams, as it were) should be responsible for identifying what needs to be done to reach the objectives.

Dependency and risk management

One of the key drivers of Agile transformation is to help organizations identify and visualize internal and external dependencies, so they can more effectively practice risk management. Identifying dependencies first, before doing any major restructuring of the organization, can help to avoid repeating the same mistakes.

Agile transformation helps organizations identify and visualize internal and external dependencies.
Agile transformation helps organizations identify and visualize internal and external dependencies.

Breaking down functional silos

Agile transformation breaks down the walls between functional silos, and encourages the formation of high-performing, cross-functional teams. The challenge then is to manage and connect the work across those teams, so that there is visibility up, down, and across the organization.

The beauty and challenge of Agile transformation is that cross-functional teams can operate autonomously, planning and delivering value continuously while staying aligned.

Release management

The beauty and challenge of Agile transformation is that cross-functional teams can operate autonomously, planning and delivering value continuously while staying aligned with other parts of the organization. Release management, then, involves coordinating the work of related teams so that their planning and delivery cadences align.

What Must Management Do For A Successful Agile Transformation?

Be a change agent

The most successful Agile transformations have executive sponsors: People at the top who see, share, and are excited by the vision of a more Agile tomorrow. Set an example for your organization by becoming an agent of change.

Don’t reorganize right away

You have to know where you’ve been to understand where you’re going. Although it might be tempting to start your Agile transformation with a wide-scale reorganization, this is not a wise approach. Instead, take time to fully audit the organization as it is, identifying strengths, weaknesses, opportunities, threats, dependencies, risks, and organizational needs before jumping into organizational restructuring.

Commit to quality

The goal of any Agile transformation is to more efficiently deliver customer value: to deliver more value, with less waste, through a better process. By making a commitment to quality, and focusing on quality metrics as your leading indicators of success, you will point your compass in the right direction.

Communicate support

Realistic, transparent, and supportive communication is key throughout your Agile transformation. As strategy, structure, people, processes, and technology changes and the organization undergoes growing pains, it’s critical for executives to over-communicate their support and understanding of the larger vision.

If you want an organization that truly innovates, you have to create a safe space for teams to experiment.

Create a safe space

It’s one thing to preach experimentation and embracing failure; it’s another thing entirely to be the person (or team) responsible for the failure in an organization where such concepts are relatively new.

If you want an organization that truly innovates, you have to create a safe space for teams to experiment. The way executives communicate sets the tone for the organization – which is why it’s so important for leadership to set the example and celebrate learning (through failure) as much as or even more than more conventional “wins.”

Deal with uncertainties openly

Similarly, dealing with uncertainties openly and transparently, is key for building trust in Agile organizations. Executives should lead by example in this.

Use OKRs

Objectives and Key Results (OKRs) is a popular goal-setting method employed by Agile organizations around the globe. This framework can be used to align the objectives and tasks of teams, release trains, and the organization as a whole.

Using OKRs to align the objectives and tasks of teams at every level of the organization.
Using OKRs to align the objectives and tasks of teams at every level of the organization.

Use the right kind of Agile metrics

You can’t manage what you don’t measure. Tracking the right Agile metrics will help you understand if your Agile transformation is on track. Agile metrics are not meant to replace business metrics or OKRs, but can provide richer insight into team performance and opportunities for improvement. Executives can use these Agile transformation metrics to stay on track:

  • Employee engagement
  • Continuous improvement
  • Innovation
  • Customer satisfaction
  • Market responsiveness
  • Productivity
  • Speed
  • Predictability
  • Quality

Conclusion

In order to be successful, Agile transformations must be two things: Comprehensive and iterative. A comprehensive Agile transformation touches every part of the organization, including processes, people, strategy, structure, and technology. Approaching this iteratively will allow organizations the time and space necessary to make these changes meaningfully, with the larger vision in mind.

Although the path to Agile transformation is winding, this is part of its beauty: There is opportunity at every turn to create an organization that is truly innovative; a place where great people are able to do their best work.

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